ORR protects the interests of rail and road users, improving the safety, value and performance of railways and roads today and in the future

Freight customer event

Welcome

21 November 2018 Setting the Context ORR Freight Customer Event

Maggie Simpson Director General – RFG 21 November 2018 Growth – the long view

Growth in Freight moved (bn tkm)

- Construction

- Intermodal Renewing the environmental case

- Working to update environmental measurements and comparisons.

- Research to inform future traction options including potential to replace / supplement diesel.

- Continued pressure for longer trains, moving more with each locomotive.

- Consideration of options to improve air quality emissions in terminals. Investment needs for next control period

4320 lorries shifted from road to rail each day under Midlands Rail Hub plans Positioning for successful Brexit

Brexit BOOST for Network Rail as expensive EU regulations set to be DROPPED

‘Don’t forget rail’ in Brexit talks, urge UK industry leaders

By Benjamin Fox and Ian Hall | EURACTIV

Rail industry seeks post-Brexit customs depots around UK

Inland freight terminals would ease congestion at Channel tunnel, says group Rail Review raises questions for freight.

| Vertically Integrated | Private Sector | Public Sector | |-----------------------|----------------|---------------| | Direction of Conservative Party Policy | | Direction of Labour Party Policy |

| Vertically Separated | Private Sector | Public Sector | |----------------------|----------------|---------------| | | | UK railways 2018 | Summary

• Strong prospects for rail freight growth

• Rail freight sector is working to reconfirm its environmental position for the future.

• Brexit remains a risk, but work is developing on key areas including Channel Tunnel.

• Potential structural reform needs careful thought to be a positive for freight sector. Thank You

maggie@rfg.org.uk www.rfg.org.uk CP6 freight access charge decisions

Freight customer event 21 November 2018

Pedro Abrantes Headlines

Charging framework:

- Stability
- Simplification

Quantum:

- 2019 – 2021: Variable costs going up by CPI inflation

- 2021 – 2028: Variable costs going up by CPI + ~3.2% p.a.

- Infra costs going up by CPI for ESI coal, iron ore and spent nuclear fuel

- Biomass to pay Infra Cost Charge from 2021 Variable charges - headlines

- Legal framework:

  - Infra costs directly incurred must be recovered from operators
  - Changes can be capped and phased-in over a finite period of time

- Capacity charge and coal spillage charge will be scrapped = saving

- But:

  - CP5 capping catching-up with us
  - NR variables costs have continued to increase

- Without capping/phasing-in, total variable charges would have gone up by 26% + inflation over CP6

- Capping/phasing-in mean that:

  - 2019-2021: variable charges will increase with CPI inflation
  - Overall CP6 increase = CPI inflation + 10%
  - Change from RPI to CPI further expected to save 5% by end of CP6. Variable Usage Charge capping/phasing-in detail

- Decision took account of ORR’s statutory duties, in particular:

  - Better use of the network
  - Supporting rail sector growth and stability
  - Impact on funding

- Total variable charges will increase by CPI inflation between March 2019 and March 2021

- Then transitioning to uncapped levels via a steady straight-line ‘glide path’ to end of CP7 (March 2024) ~ CPI + 3.2% p.a.

- The increase in total variable charges over CP6 will be CPI+10% Infrastructure cost charges (1)

- Freight-only line (FOL) and freight specific charge (FSC) being replaced with overall infrastructure cost charge (ICC)

- ESI coal, iron ore and spent nuclear fuel will continue to be charged ICCs

- Charges will increase with CPI inflation

- Freight services carrying biomass for the electricity supply industry (ESI biomass) deemed to be able to bear a mark-up charge in CP6

  - This will be introduced in April 2021 and increase gradually to the end of CP6
  - Our decision took into account the fact that there could be some reduction in biomass traffic as a result of this charge. Infrastructure cost charges (2)

Similar to the way ICCs were introduced for ESI coal, iron ore and spent nuclear fuel in CP5, the charge will be phased in for biomass services over CP6.

| 2017-18 prices | 2019-20 | 2020-21 | 2021-22 | 2022-23 | 2023-24 | |----------------|---------|---------|---------|---------|---------| | ESI coal | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | | Iron ore | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | | Spent nuclear fuel | 34.2 | 34.2 | 34.2 | 34.2 | 34.2 | | ESI biomass | 0.0 | 0.0 | 0.3 | 0.9 | 1.4 |

Note: charge in £ per thousand gross tonne mile (kgtm). Biomass takes into account phase-in profile. ORR Freight Customer Event Network Rail update

Paul McMahon Managing Director, Freight & National Passenger Operators 21st November 2018 Safety moment Freight & National Passenger Operators

- Established as “ninth operational route” or “virtual route”
- Formation of FNPO, built on National Freight team, established following McNulty
- Strongly supported by customers and stakeholders with high levels of FNPO people engagement
- Do not physically operate infrastructure but are accountable for outputs
- Principal point of contact with customers who operate over multiple routes
- Work closely with rail freight end users, who include ports, aggregates companies, third party logistics providers Our national customers and our priorities

Our Purpose

Deliver growth and provide excellent service for our customers and stakeholders, through improving safety and performance, and enhancing capacity and capability, at an efficient cost. FNPO Priorities

Deliver safe, reliable and efficient performance

Customer focused and collaborative

Develop the FNPO team, in line with wider transformation

Identify and provide network capacity and capability

Business development to generate growth

## FNPO Route Scorecard at Period 8

### Route

#### NATIONAL OVERVIEW

| Route Scorecard - FNPO | Period Business Review | |------------------------|------------------------| | **Report Owner** | Paul McMahon |

#### SUPPORT FUNCTIONS

| Period | YTD | FYE | |--------|-----|-----| | | | |

#### STRATEGIC PAPERS

| Period | YTD | FYE | |--------|-----|-----| | | | |

#### GUEST PAPERS

| Period | YTD | FYE | |--------|-----|-----| | | | |

### Safety - (PRP 20%)

| PRP Weighting | Actual | Target | Actual | Target | FYE | Worse than Target | Target | Better than Target | FYE | Achievement | FYE Weighted Achievement | |---------------|--------|--------|--------|--------|-----|-------------------|--------|-------------------|-----|-------------|--------------------------| | Work related absence | 5.0% | 0 | 1 | 0 | 13 | 10 | 40 | 20 | 0 | 75% | 3.75% | | Violations | 4.0% | 0 | 1 | 0 | 6 | 6 | 12 | 12 | 12 | 0 | 0.00% | | SPADs | 4.0% | 0 | 1 | 0 | 6 | 6 | 12 | 12 | 12 | 0 | 0.00% | | Close Calls Raised | 2.0% | 19 | 12 | 12 | 112 | 111 | 229 | 131 | 17 | 233 | 20.00% | | Close calls closed within 90 days | 2.0% | 100% | 100% | 90% | 100% | 80% | 90% | 20.00% | | Operator last time incidents on NR infrastructure | 1.0% | 0 | 1 | 2 | 7 | 6 | 16 | 12 | 8 | 20.00% |

### Track Performance Measures - (PRP 20%)

| PRP Weighting | Actual | Target | Actual | Target | FYE | Worse than Target | Target | Better than Target | FYE | Achievement | FYE Weighted Achievement | |---------------|--------|--------|--------|--------|-----|-------------------|--------|-------------------|-----|-------------|--------------------------| | Freight Delivery Metric (ODM-R) | 6.0% | 94.0% | 93.9% | 93.7% | 93.4% | 93.0% | 94.0% | 94.5% | 96.5% | 30% | 1.00% | | Right time Departures - Freight | 3.0% | 76.9% | 76.9% | 76.4% | 76.9% | 76.9% | 76.9% | 76.9% | 76.9% | 76.9% | 76.9% | | ROC on TDC (PM/ID train km) | 3.0% | 1.0% | 1.0% | 1.0% | 1.0% | 1.0% | 1.0% | 1.0% | 1.0% | 1.0% | | Delay per incident - Freight | 0.0% | 35.5 | 38.8 | 27.5 | 26.6 | 26.8 | 26.3 | 27.1 | 28.0 | 31% | 0.00% | | Cross Country - PMI | 3.0% | 82.5% | 87.6% | 83.5% | 87.9% | 82.3% | 80.2% | 90.0% | 90.0% | 90.0% | 0.00% | | Cross Country - Calls | 3.0% | 5.7% | 6.7% | 6.0% | 5.3% | 6.0% | 5.3% | 5.3% | 5.3% | 5.3% | 0.00% | | Cross Country - Time to 3 minutes | 0.0% | 63.6% | 64.8% | 67.2% | 72.7% | 65.4% | 72.5% | 73.5% | 76.5% | 0% | 0.00% | | Cross Country - Cancellations | 0.0% | 2.4% | 2.9% | 2.7% | 3.1% | 2.1% | 2.0% | 2.0% | 2.0% | 2.0% | | Calendarian Sleeper-Right Time | 1.0% | 77% | 75% | 70% | 77% | 80% | 75% | 80% | 80% | 80% | 1.50% | | Charter Train - performance measure | 0.0% | 80% | 91% | 90% | 90% | 88% | 88% | 90% | 90% | 90% | 0.00% |

### Investment & Asset Management - (PRP 10%)

| PRP Weighting | Actual | Target | Actual | Target | FYE | Worse than Target | Target | Better than Target | FYE | Achievement | FYE Weighted Achievement | |---------------|--------|--------|--------|--------|-----|-------------------|--------|-------------------|-----|-------------|--------------------------| | CPS S/N schemes - current year GIP G-completion vs baseline | 10.0% | 90% | 90% | 90% | 90% | 90% | 90% | 90% | 90% | 90% | 5.00% |

### Customer - (PRP 30%)

| PRP Weighting | Actual | Target | Actual | Target | FYE | Worse than Target | Target | Better than Target | FYE | Achievement | FYE Weighted Achievement | |---------------|--------|--------|--------|--------|-----|-------------------|--------|-------------------|-----|-------------|--------------------------| | Network rail index - Freight (Great Britain) | 4.0% | 1.0% | 0.8 | 7.1 | 6.5 | 11.4 | 11.4 | 11.4 | 11.4 | 11.4 | 3.00% | | Freight service plan review - delivery against agreed milestones | 3.0% | 100% | 90% | 94% | 90% | 90% | 90% | 90% | 90% | 90% | 1.50% | | Strategic capacity - Freight | 3.0% | 21% | 15% | 21% | 15% | 15% | 15% | 15% | 15% | 15% | 1.50% | | Cross Country - Average minutes late | 4.0% | 6.0% | 5.0% | 6.0% | 6.0% | 6.0% | 6.0% | 6.0% | 6.0% | 6.0% | 0.00% | | Cross Country - Access planning agreed milestones met | 4.0% | 81% | 60% | 70% | 80% | 78% | 78% | 80% | 80% | 80% | 3.00% | | Calendarian Sleeper - Roll-up of customer scorecard | 1.0% | 50% | 50% | 50% | 50% | 50% | 50% | 50% | 50% | 50% | 2.25% | | Charter planning compliance | 1.0% | 61% | 61% | 61% | 75% | 75% | 75% | 75% | 75% | 75% | 3.00% | | Freight End Use (RUL) satisfaction | 6.0% | 61% | 61% | 61% | 75% | 75% | 75% | 75% | 75% | 75% | 3.00% |

### Financial Performance - (PRP 15%)

| PRP Weighting | Actual | Target | Actual | Target | FYE | Worse than Target | Target | Better than Target | FYE | Achievement | FYE Weighted Achievement | |---------------|--------|--------|--------|--------|-----|-------------------|--------|-------------------|-----|-------------|--------------------------| | Financial Performance Measure (FPM) | 15.0% | -4% | -8% | -1% | 0% | -1% | -10% | 0% | 10% | 87% | 7.04% |

### People - (PRP 10%)

| PRP Weighting | Actual | Target | Actual | Target | FYE | Worse than Target | Target | Better than Target | FYE | Achievement | FYE Weighted Achievement | |---------------|--------|--------|--------|--------|-----|-------------------|--------|-------------------|-----|-------------|--------------------------| | Your Voice Action Plans - delivery against agreed milestones | 5.0% | 100% | 90% | 100% | 80% | 80% | 80% | 80% | 80% | 80% | 5.00% |

### Period 8

- **Network Rail Index - Freight (Great Britain)**: 11.4%
- **Freight Service Plan Review - Delivery Against Agreed Milestones**: 90%
- **Strategic Capacity - Freight**: 15%
- **Cross Country - Average Minutes Late**: 6%
- **Cross Country - Access Planning Agreed Milestones Met**: 80%
- **Calendarian Sleeper - Roll-up of Customer Scorecard**: 50%
- **Charter Planning Compliance**: 61%
- **Freight End Use (RUL) Satisfaction**: 61%
- **Financial Performance Measure (FPM)**: 87%
- **People - (PRP 10%)**: 80% Freight traffic trends

## Capacity & Capability – Total SFN Contributions £419.7m

| Scheme | SFN funding (£m) | Complete (freight part) | Output | |-----------------------------------------------------------------------|------------------|-------------------------|------------------------------------------------------------------------| | Ipswich Chord | 50.5 | Mar-14 | Increased capacity, faster journey times | | Ipswich Yard | 32.7 | Dec-14 | Increased capacity, longer trains, better operations | | North Lincolnshire resignalling and re-control | 4 | Jan-16 | Improved operations | | Southampton – WCML diversionary gauge | 29.2 | Jul-16 | Clearance for diversionary capability | | Southampton Freight Train Lengthening | 90.5 | Mar-19 | 775m capability | | Banbury area remodelling / Oxford corridor | 20.2 | Mar-19 | Line speed improvement, reduced headways | | Northern Ports Freight Capacity | 8 | Mar-19 | Improved capacity to Port of Liverpool | | Great Western Main Line gauge clearance | 15.2 | Mar-19 | Clearance for 9’6” high maritime containers on standard deck wagons | | Thames Haven Level Crossing improvements | 0.5 | Mar-19 | | | Peak Forest Freight Train lengthening | 48.9 | Mar-19 | Longer, heavier trains, upto 3000t | | Gauge clearance schemes connecting W Midlands / S East with N East / Scotland | 67.3 | Mar-19 | Clearance for 9’6” high maritime containers and domestic/European swapbodies on standard deck wagons | | Ripple Lane Nodal Yard (GRIP 3) | 0.3 | Jul-19 | Enables European traffic to access terminals in Barking/Dagenham area | | Felixstowe Branch Line Capacity | 52.4 | Aug-19 | Upto 47tpd each way | | Question | Score (out of 5) | |-------------------------------------------------------------------------|------------------| | 1 – During the last 6 months, how satisfied are you with Network Rail | 3.47 | | overall? | | | 2 – During the last 6 months how satisfied are you with the Network | 3.13 | | Rail Freight? | | | 3 – In the last 6 months are you satisfied Network Rail has put safety | 3.93 | | first in its dealings with your company? | | | 4 – During the last 6 months how satisfied are you with Network Rail | 3.13 | | infrastructure reliability and performance? | | | 5 – During the last 6 months how satisfied are you with the progress | 2.80 | | of any current / relevant Network Rail delivered projects (eg Strategic | | | Freight Network / other Enhancements / improvements)? | | | 6 – Thinking about the last 6 months how satisfied are you that Network | 3.47 | | Rail is helping to deliver your wider business objectives? | |

**Overall score 61% against a target of 73%**

# Proposed Freight End User Scorecard

| Freight End User Scorecard | Satisfaction | Traffic | Performance | Safety | |----------------------------|--------------|---------|-------------|--------| | All Commodities | Target | TBC | TBC | TBC | | | Actual | TBC | TBC | TBC | | Intermodal | Target | TBC | TBC | TBC | | | Actual | TBC | TBC | TBC | | Construction | Target | TBC | TBC | TBC | | | Actual | TBC | TBC | TBC | | Metals | Target | TBC | TBC | TBC | | | Actual | TBC | TBC | TBC | | Energy | Target | TBC | TBC | TBC | | | Actual | TBC | TBC | TBC | | Automotive | Target | TBC | TBC | TBC | | | Actual | TBC | TBC | TBC | | Royal Mail | Target | TBC | TBC | TBC | | | Actual | TBC | TBC | TBC | | Other | Target | TBC | TBC | TBC | | | Actual | TBC | TBC | TBC |

A better railway for a better Britain FNPO Route

- Noted that FNPO route is different
- Role is to provide “advocacy” for customers across all NR

Stakeholder engagement and satisfaction

- Continue customer/FEU satisfaction surveys
- Set up Supervisory Board

CP6 Scorecards

- Content with Route scorecard targets
- FDM 94.0%; FDM on Route scorecards
- All ‘TBC’ to be agreed by March 19
- Supportive of customer scorecards
- FEU scorecard to be developed

Access charges

- Freight access charge increases – capped and phased

Safety

- Allocated £22m to address and mitigate safety risk

Scotland

- Specific measures for growth, gauge and journey time

Capacity & capability

- Maintain published and operational capability
- 15.6% growth in freight moved assumed

Financials

- £28m for Opex CP6 Traffic Forecast

Historical and forecast total rail freight tonnes lifted in GB: scenarios for 2023/24

- Actual
- Sc B3
- Sc A3
- RSP
- Sc D2
- Sc C2

Million tonnes per year

2004 2009 2014 2019 2024

## CP6 candidate enhancement schemes

| Key Freight Corridor | CP6 Candidate Freight Schemes | Estimated cost range | |----------------------|-------------------------------|----------------------| | **Felixstowe to West Midlands & the North** | – Doubling of Haugley Jn\
– Signalling Headways Bury\
– Ely area (level crossings / bridge speeds)\
– Ely to Soham doubling\
– Peterborough - Syston signalling/level crossings\
– Syston – Sheet Stores gauge (W10/W12)\
– Further refine layout at Ipswich Yard | £10m – £15m\
£50m – £70m\
£100m – £250m\
£120m – £150m\
£50m - £60m\
£5m - £10m\
£1m - £5m | | **Southampton to West Midlands & WCML** | – Kenilworth doubling | £100m - £170m | | **Channel Tunnel classic route** | – Gauge enhancement (up to W12) | £50m - £80m | | **Cross London, and Essex Thameside** | – Ripple Lane Nodal Yard\
– Thameside Level Crossings (capacity) | £10m - £15m\
£30m – £40m | | **Northern Ports & Trans Pennine** | – Trans Pennine gauge enhancement (up to W12)\
– New loop between Up Decoy and South Yorkshire Joint Line\
– Trans Pennine freight capacity | £100 - £200m\
£5m-£10m\
tbc | | **Total** | | c.£0.6bn - £1bn | The future... The case for Government support for the rail freight industry is articulated in its Rail Freight Strategy

- Government’s Rail Freight Strategy was published in September 2016

- Government policy: support modal shift and rail freight growth to mitigate the negative external impacts of road haulage.

- Support for rail freight based on productivity gains, reduced road congestion and environmental benefits.

- Sets out vision for how rail freight can continue to grow, collaborate, and innovate to help relieve pressure on the road network.

- Identifies intermodal, construction and automotive sectors as key growth areas The strategy identifies four priority areas where action by Government & industry could help rail freight achieve its potential

| Innovation and skills | Network Capacity | |-----------------------|------------------| | ✓ BEIS’ Clean Growth Strategy to look at freight into cities with zero emission last mile delivery | ✓ HLOS & SOFA include funding for strategic freight network | | ✓ Innovate UK funded Accelerating Rail Innovation project into short freight ‘track train’ | ✓ NR’s ‘FNPO’ established | | ✓ SofS issued guidance to ORR to consider affordability of charges, recognising benefits of rail freight | ✓ Investment in digital ETCS freight cab fitment | | ✓ ORR’s Final Determination issued cap and phasing-in of VUC for rail freight | ✓ Freight in franchising workstream |

| Track access charging | Telling the story of rail freight | |-----------------------|---------------------------------| | ✓ HLOS & SOFA include funding for strategic freight network | ✓ RDG published ‘Rail Freight: Working for Britain’ in summer 2018 | | ✓ NR’s ‘FNPO’ established | ✓ DfT Rail Freight video | | ✓ Investment in digital ETCS freight cab fitment | | | ✓ Freight in franchising workstream | | We meet regularly with our stakeholders to identify the strategic challenges facing the rail freight industry. DfT is working on many live issues to support rail freight – many require collaboration with industry and across government

| Freight enhancement schemes in CP6 | Continuation of red diesel rebate | Continuation of MSRS | Development of Strategic Capacity | Better understanding of economic value of rail freight | |-----------------------------------|----------------------------------|----------------------|----------------------------------|-----------------------------------------------------| | HS2 | Cross-modal approach to freight policy | Ensuring freight has appropriate protections in any new model | Clarifying what capacity is available for freight growth | Working with industry on decarbonisation and air quality | | Stable and affordable track access charging regime | Ensuring freight is properly represented in the Rail Review | Highlighting the benefits of rail freight to OGDs | A good Brexit outcome for Channel Tunnel rail freight | Ensuring industry behaviours facilitate rail freight growth | New Approach to Enhancements Rail Network Enhancements Pipeline

James Conway Programme Director, London and South East Rail Enhancements Lessons from Control Period 5

Report from Sir Peter Hendy to the Secretary of State for Transport on the replanning of Network Rail’s Investment Programme

November 2018 Rail Network Enhancements Pipeline Engaging with the pipeline

- Only commit to the next stage of the pipeline
- Each decision taken will be informed by a business case
- Entry into the pipeline does not guarantee it will be delivered

More information at: https://www.gov.uk/government/publications/rail-network-enhancements-pipeline Delivering Enhancements in CP6

Dave Whyte Planning & Investment Manager, West Midlands, Chiltern and Freight Enhancements delivered or in delivery through the SFN Fund in CP5

- Felixstowe Branch Capacity Enhancement
- Southampton Freight Train Lengthening
- Buxton Peak Forest
- Ripple Lane Nodal Yard
- Gauge Clearance (Humber / Yorkshire to Midlands; ECML North)
- Enhanced capacity / gauge to ports (Liverpool / Thameshaven / Immingham)
- Business case development for potential CP6 enhancements Approach for CP6

SFN Steering Group: Chaired by NR FOCs RFG DfT Advises FEPB

Freight Enhancements Programme Board: Chaired by DfT Meets bi-monthly Oversees Programme

Enhancements Portfolio Board: Change in scope / cost / milestones

BICC / Rail Investment Board / Network Services Board: Funding / Business Case Approval ORR protects the interests of rail and road users, improving the safety, value and performance of railways and roads today and in the future

Freight customer event

ORR regulation

21 November 2018

Gordon Herbert, Patrick Talbot, Lisa Thurston, Jeremy Bohl. ORR protects the interests of rail and road users, improving the safety, value and performance of railways and roads today and in the future. ORR overview

- Our railway health, safety, economic and road functions overall are driven by UK and EU legislation and on the basis that we are also accountable to laws passed by the Scottish government.

- As a regulator we are accountable to Parliaments and the public to:

  - Protect the people who work on, use, or interact with the railway. This is both to ensure continuous improvement in health and safety and, on the economic side, to temper the monopoly power of Network Rail.
  - Ensure fair access to a rail network and other infrastructure which are becoming increasingly congested.
  - Ensure Highways England carries out its investment programme on England’s strategic road network effectively. It is our job to report on Highways England’s progress in delivering this investment, on budget and to time.
  - Protect the interests of future users by working with the industry and with funders as they develop the network of tomorrow. Freight customers

- Freight customers are those with a direct interest in rail freight, including purchasers of services and their representative bodies, but not the operators of the trains.

- ORR wants to better understand the interests of rail freight customers, balancing them with the interests of other users and with funders of the rail network.

- Webpage, feedback and ideas

  - [http://orr.gov.uk/about-orr/who-we-work-with/industry-organisations/freight-customers](http://orr.gov.uk/about-orr/who-we-work-with/industry-organisations/freight-customers).

- Freight customer panel

  - “help to ensure that our policies and regulatory decisions take into account the commercial environment that freight customers work within”.
  - ORR’s panel is made up of freight customers who represent a wide area of expertise and interest from across the rail freight community.

- Specific initiatives

  - Freight customer track access contracts. ORR protects the interests of rail and road users, improving the safety, value and performance of railways and roads today and in the future

Access

Gordon Herbert Track access manager (freight) Access and Licensing Team, ORR Gordon.Herbert@orr.gsi.gov.uk Track.access@orr.gsi.gov.uk Access: framework

- Railways Act, Access and Management Regulations

- Track access

  - NR contracts
  - New/other IMs

- Facility access

  - Contracts
  - Appeals

- Connection contracts

- ORR guidance and advice

- Open, transparent, efficient and competitive market. Access: current issues

- Service facility transparency

  - AMRs and Implementing Regulation on Service Facilities
  - NR network statement and other IMs – NR templates
    - “The Common Template” is available on RailNetEurope’s website.
    - networkstatement@networkrail.co.uk

- Model clauses FACs

- New networks/other than NR

- Changing markets and access rights

  - Access rights framework, model clauses
  - Enhancements, Capacity, Investment ORR protects the interests of rail and road users, improving the safety, value and performance of railways and roads today and in the future

ORR’s approach to competition policy in the rail freight industry

Jeremy Bohl Lisa Thurston November 2018 Agenda

- ORR’s competition role
- Competition CA98 investigation: Intermodal (deep sea container) case
- Access issue: Scope for potential application of the A&M Regs
- What you can do ORR protects the interests of rail and road users, improving the safety, value and performance of railways and roads today and in the future. We use competition policy (and where necessary our powers) to optimise competitiveness and create conditions for innovation, efficiency and growth. Competition powers

**Competition Act 1998 (CA98)**

- Chapter 1/ Article 101 TFEU – agreements between undertakings (business) or decisions of associations of undertakings (e.g. trade associations), and concerted practices which have, as their object or effect, the prevention, restriction or distortion of competition within the United Kingdom (or any part of it) and which may affect trade in the United Kingdom

- Chapter 2/ Article 102 TFEU - conduct by one or more undertakings amounting to the abuse of a dominant position in a market which may affect trade within the United Kingdom. This is known as the Chapter II Prohibition

**Railways (Access, Management and Licensing of Railway Undertakings) Regulations 2016 (A&M Regs)**

- Regulation 34 provides ORR with the power to issue directions to correct discrimination against applicants for access to the rail network, market distortion; or undesirable developments in relation to the competitive situation in the rail services markets ORR protects the interests of rail and road users, improving the safety, value and performance of railways and roads today and in the future

Competition CA98 investigation: Intermodal (deep sea container) case Overview

- CA98 opened in August 2014

- Suspected abuse of a dominant position in the provision of deep sea container rail transport services between ports and key inland destinations in Great Britain.

- ORR accepted commitments in December 2015. These will remain in force until 31 March 2019 ORR’s competition concerns

Contractual Clauses

- Restrictions on resale
- Minimum volume commitments
- Loyalty enhancing rebates
- Exclusive purchasing obligations
- Duration Commitments – some examples

**Outright/express exclusivity**

- Outright end to practice
- Not enter any contracts which require customers to purchase exclusively from a single FOC

**Restrictions on resale**

- Outright end to practice
- Not enter into any contracts which place any restrictions or conditions on re-sale.

**Retroactive rebates**

- Outright end to practice.
- Remove all retroactive rebates in place with customers on the routes specified in the commitments.

**Minimum volume commitments**

- Mitigation
- Provide customers with rights to reduce their minimum volume commitments after a set period

**Duration**

- Outright end to practice

- Remove evergreen clauses. Not enter any contracts with a duration of more than 5 years. Impact

- Preliminary data suggests a positive impact on competition:

  - Ability for customers to choose shorter more flexible contacts
  - As contacts are open to competition on an annual basis, customers have more ability to choose the FOC with the most competitive offering
  - Indications of more rivalry between FOCs

- However, there are still issues with gaining access to the network ORR protects the interests of rail and road users, improving the safety, value and performance of railways and roads today and in the future

Access issue: Potential application of the A&M Regs Complaint regarding access to rail facilities

- Key concern was the potential that the operator of the facility was preventing a customer of a freight operator from operating at the facility and expanding its business.

- ORR considered all options including issuing a direction under the A&M regs.

- ORR’s policy objective was to ensure fair competition and market conditions for growth.

- Ultimately resolved issue without the use of regulatory or competition powers. What you can do

■ If you experience an issue which could be anti-competitive contact us:

http://orr.gov.uk/rail/promoting-competition/how-to-report-a-breach-of-competition-law

■ Examples of anti-competitive conduct:

– Issues with getting access to rail facilities – Price fixing between freight operators – Markets being split by geography or customer by freight operators (customer sharing) – Exclusivity requirements by freight operators ORR protects the interests of rail and road users, improving the safety, value and performance of railways and roads today and in the future

Safety Matters

Patrick Talbot Health and Safety Regulation

- Safety Regulator for Britain’s Railways

  - Responsible for all railways (mainline, metros, heritage, trams)
  - Certification body (safety certificate/authorisation)
  - Enforcing authority for health and safety legislation
  - Prosecuting authority What about off-network sites?

- Enforcing Authority is most likely either ORR or HSE

  - Health and Safety (Enforcing Authority for Railways and Other Guided Transport Systems) Regulations 2006 (as amended) (EARR)
  - Clarification in the MoUs between ORR, HSE and ONR
  - Enforcing Authority may vary depending on the nature of the activity carried out on site
  - Usually exempt from the requirements of ROG S

iPort Rail Freight Safety Issues

- Unauthorised access

- Freight derailment

  - Interconnected factors (infrastructure condition, vehicle maintenance and loading) lead to derailment
  - Industry Cross Industry Group (XIFDWG)
    - Collaborative approach to solving a system problem
    - Representatives from Network Rail, FOCs, Customers, Wagon owners, consultants Off- Network Infrastructure

- Two questions…

- How can railway safety performance be improved and maintained?

- How can guidance, best practice and learning from incidents be shared? Questions/ queries/ more information:

Patrick Talbot, HM Principal Inspector of Railways

- patrick.talbot@orr.gov.uk